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Looking Cloudy Cloud computing is the new business model, but is everyone ready for it? Wednesday, November 25, 2009 Beth Kormanik

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As hotel IT managers chart their technology needs, here's one piece of advice: consider the cloud.

Cloud computing is a style of computing in which common business applications are provided online as a service to external customers. Instead of a business buying the latest software on a disc and handling the maintenance itself, the business would subscribe to a cloud computing service and use the software online. When newer versions come out, the business would not have to buy the upgrade.

Cloud computing is "the final revolution in computing," according to Zach Nelson, CEO of the cloud computing firm NetSuite. At a recent cloud computing seminar in New York, he posed the question: Are you really going to run your business on systems designed before the Internet existed?

Jeff Woods is the managing vice president for Gartner Research, which provides IT advisory services. He said 2010 would mark a major turning point in IT history.

"This is one of those major revolutions in IT," he said. "It's not simply a continuation of the Web. What we're talking about in cloud-based computing is fundamentally different."

In a recent survey of chief information officers, Gartner found that their No. 1 priorities, in order, were improving business processes, cutting enterprise costs, and attracting and retaining customers. Their top technology priorities were business intelligence, enterprise applications and legacy application modernization. Cloud computing fits into these goals, he said.

"Even mainstream, risk-adverse companies are going to feel comfortable going to cloud computing," he predicted.

Neil Glass, CFO of Ziff Davis Media, said his company was working off a legacy system and needed something new. They went with the cloud services at NetSuite, despite initial worries about moving to a new system. "Our team recognized we were operating like dinosaurs," he said.

After the transition, the company trimmed staff because it has more automation.

"We've come through a stronger company," Glass said.

According to Nelson, NetSuite clients have saved money by lowering their costs, and increased productivity by having fewer workers dedicated to running the system.

Hotel management may be familiar with certain cloud applications, such as using them to set up wireless routers. But cloud applications are spreading to all aspects of business from customer relations management (CRM), sales force automation and invoice presentation.

Woods said cloud computing is appealing to businesses like hotels because it is a cheaper way to deliver services. It creates economies of scale by managing servers.

Nelson said the cloud offers a new business model that shifts the power to the end user. Under a subscription model, the money comes through long-term relationships, not quick sales of software. Nelson said the model offers better customer service and real-time feedback.

"I have to make you happy or you will not renew," he said. "We have a real-time, ongoing relationship."

Not everyone is moving the entirety of their business online, however. Woods said it's a myth that everything needs to be in the cloud. He predicted that most companies will have a hybrid cloud-hardware model for the next 10 years.

"This isn't like Y2K," he said. "Airplanes won't fall out of the sky because they fail to meet the cloud computing challenge."

Instead, companies that ignore the cloud will see themselves gradually falling behind.

Eric Berridge is co-founder of Bluewolf, which provides consulting for cloud solutions. Initially, his company started by working with smaller companies who needed to use the cloud because they had smaller staffs and limited technology budgets. Now larger companies are signing on. The first concern clients have is wondering where their data is and whether it is safe. Now, he said people are more comfortable with the idea.

The shift to cloud computing means hotels may need to find new tech suppliers.

"The people you rely on today are probably not the ones that will take you into the cloud," Nelson said.

Before moving to cloud computing, hotels and other hospitality-sector companies should set some ground rules. First, Woods suggested that IT explore sourcing and get in front of the issue so individual departments do not source bad, long-term contracts. Vetting a supplier is one of the most important things, he said, because one of the risks of cloud computing is there currently is not a lot of portability.

Hotels also should realistically determine their security needs. Never follow a strategy of "deploy now, secure later," he said. Finally, ensure you are doing something different with the cloud. Extensions of on-premise styles are likely to be less effective.

"As a business," Woods said, "you need to position yourself and take advantage of changes in the application landscape."